Van Tharp: Transformative Methods of a Famous Trader
A trading mistake occurs when you don’t follow your written rules. And, if you don’t have written rules then everything you do is a mistake.
One of my tasks of trading is called a daily debriefing. One aspect of this is for the trader to decide if they have made any mistakes that day and what it cost them in terms of their initial risk, or R.
I require each of my Super Traders keep a mistake log as part of their program, and it’s integral to their success in the program. When students begin, they are about 70-80% efficient. That means 2-3 mistakes every ten trades.
Let’s say your system makes 0.8R per trade. That means that after 10 trades you should be up 8R. But, if you make 2 mistakes each costing 3R, then you are only up 2R. And, a third mistake puts you in the negative.
You’ve turned a good system into a losing system, simply by making mistakes – and most people are never aware that they are doing it.
To become a graduate from the Super Trader program students must complete 100 trades with at least an efficiency of 95%. And it’s not as easy as it may sound.
